Oil Prices Hedge Higher Over Tighter Supply Concerns
Originally uploaded on March 22, 2024
Oil prices have surged over the past week as signs of increased U.S. refinery activity, improved Chinese demand and persistent disruptions in the Middle East presented a tight outlook for oil markets.
This notion was furthered by Iraq, the second biggest producer in the Organization of Petroleum Exporting Countries, stating that it will cut crude exports to compensate for higher production so far in 2024.
"The move is primarily to absorb the oversupply from Jan’24-Feb’24 and to showcase the nation’s commitment to stick to its voluntary oil cuts as part of the OPEC+ agreement," according to analysts at ING, in a note.
"Recent OPEC numbers showed that Iraq pumped 0.2m b/d of oil above its agreed quota of 4m b/d last month."
Data from Saudi Arabia also showed crude exports from OPEC’s biggest producer fell for a second straight month in January. In Russia, Ukrainian attacks put a key fuel refinery out of commission.
Signs of tighter supplies also come amid some improving economic indicators from major crude consumers, specifically China. The country’s industrial production and fixed asset investment grew more than expected in the first two months of 2024, while travel demand also recovered to pre-COVID levels during the Lunar New Year holiday.
It remains to be seen whether China can carry this momentum into the coming months, especially as consumer spending still remains weak.
Fuel card users can expect an increase in the region 1.5 -2 pence per litre for next week as we head towards the Easter holidays.